Special mechanisms for collecting contributions
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Summary of innovative mechanisms to extend social insurance coverage to independent workers
this special scheme
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. One of the most significant reforms that this scheme has undergone was the inclusion of one-person businesses, in addition to de facto companies, with some
restrictions. The reform extended the type and maximum number of activities companies may be involved in
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, and incorporated into the system those companies selling their products by credit card. Before the reform, only small companies selling products to end
consumers were included. Currently, registration for the scheme is allowed not only to companies selling to end consumers, but also to those marketing their products to private
companies and the State, although there are some exceptions. Also, there was an increase in the maximum turnover allowed for a company to entitle it to enter this scheme. This
measure enabled annual increases over 100 per cent both for small commercial companies and service providers.
The scale of the results generated by this scheme is evidenced by the increase in the average annual growth of one-person businesses registered. Between 2002 and 2006 this
amounted to 1.3 per cent, whereas between 2007 and 2009, when the reforms came into force, the increase amounted to 6.5 per cent. In absolute terms, the reform generated an
estimated increase of 12,722 one-person businesses registered between the dates above.
The case of auto-entrepreneurs in France In 2008, the French Government launched a new status for business owners. Auto-
entrepreneurs are independent workers with an annual turnover under € 81,500, for trading activities, or under € 32,600 for service provision.
Auto-entrepreneurs are subject to specific regulations on taxation and social security contributions. Registration in social security schemes is compulsory for auto-
entrepreneurs. Unlike the rates applicable to other independent workers, contributions are established as a package, in terms of an income percentage which varies from 12 per cent
and 21.3 per cent, depending on the sector within which the business is located. Auto- entrepreneurs also may choose to pay a universal package, determined as a percentage of
income, which incorporates both social contributions and income taxes, thus greatly easing the accounting in the business creation stage.
―Auto-entrepreneur‖ is a flexible independent worker status which aims to encourage and facilitate business creation and development. An auto-entrepreneur may for instance
also undertake some wage labour. It can be seen as a tool to formalize work which was previously undeclared for several reasons procedure complexity, incompatibility with
other declared income sources, etc., especially in service providing cleaning, gardening, etc.. This initiative was very successful from its inception, in terms of business creation.
In 2011, there were more than 700,000 active business owners.
The case of Super Simples in Brazil In Brazil, Simples Nacional has become an important mechanism to protect workers
in micro and small companies. This special scheme was established in 1996 under the terms of the
Lei do Simples
―Law of Simple‖, and has been the object of important changes since its enactment.
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These changes were introduced through the Ley de Reforma Tributaria de 2006, 2006 Tax Reform Law in force since July 2007. The reform was promoted by the BPS Board of Directors,
and subsequently undertaken by the Executive and the Parliament.
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There was an inclusion of companies selling goods, and providing services, as well as of small artisan producers.
Innovations in extending social insurance coverage to independent workers
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Simples Nacional enables a simplified tax procedure for micro and small companies. The scheme has created an integrated system for the payment of some taxes and
contributions to social security. In the case of taxes, five federal taxes were integrated, together with one state tax, one municipal tax, and the contributions of employers to the
INSS.
Registration in the scheme is optional and can be completed online. For the purposes of Simples Nacional, a micro company is defined as a business owner or legal person
whose annual gross income is equal to or under 240,000 Brazilian Reals R, or US 145,000 annually, and a small company is considered to have an annual gross income
between R240,000 and R2,400,000 US 1,450,000 annually. Based on this classification, there is a system of progressive contribution percentages to the INSS.
Registrants enjoy lower contribution rates when compared with those applied in the General Scheme. This scheme has had an important impact. The production of micro and
small companies represents more than 20 per cent of the GDP, and they contribute to about 10 percent of all taxes collected.
For vulnerable workers who are not covered by the Simples Nacional, the INSS offers coverage through registration as an individual contributor as detailed in the Social Welfare
Simplified Plan, presented in section 4.2.1 of this document.
This simplified scheme, as well as Uruguays Monotributo Scheme and Frances auto- entrepreneurs scheme, highlight the importance of moving toward the establishment of
specific schemes specifically targeting the labour markets vulnerable sectors, such as micro and small company workers, including their respective owners. None of the cases of
special schemes considered in this document have resulted in a limitation of labour rights.